Flap over loan to Iraq spurs CIA-Justice feud

October 11, 1992|By New York Times News Service

WASHINGTON -- A fractious and public dispute between two usually secretive agencies heated up yesterday as CIA and Justice Department officials accused each other of concealing information about a multibillion-dollar bank fraud involving Iraq.

The unusual finger-pointing over the case came in the wake of a disclosure Friday that the CIA had told Congress that agency officials, at the urging of the Justice Department, had deliberately withheld information about the bank fraud.

The Bush administration's handling of the case has been widely criticized by a handful of congressional Democrats who have charged that the administration is attempting to hide what they call its misguided policy toward Iraq.

CIA officials said yesterday that when they realized erroneous information about the agency's knowledge of the case had been given to federal prosecutors in a Sept. 17 letter, they sent the Justice Department a proposed statement revealing the extent of the CIA's knowledge on the issue. The Justice Department, the CIA officials said, declined to release the statement.

A Justice Department spokesman, Paul McNulty, acknowledged that the CIA had proposed issuing such a statement. But Justice Department officials opposed releasing it because they felt it was inadequate, factually incorrect and failed to portray correctly the Justice Department's view of the case, he said.

The dispute could not come at a worse time for President Bush. It is certain to encourage critics of the administration who believe that officials deliberately hid information about the case as part of a governmentwide cover-up.

The CIA, the Justice Department and the Bush administration have all denied wrongdoing in the case.

The Justice Department announced yesterday that Attorney General William P. Barr had asked the FBI to begin an internal review of how Justice Department prosecutors and CIA officials handled classified information about the scandal, which involved loans to Iraq that were approved by the Atlanta branch of Banca Nazionale del Lavoro, an Italian bank.

In a sharply worded statement yesterday, the CIA denied that its officials told a Senate committee last week that the agency deliberately withheld information from federal prosecutors in Atlanta at the urging of the Justice Department.

The CIA also denied that there was any attempt to mislead prosecutors and it blamed the news media for misrepresenting the CIA position.

But Elizabeth Rindskopf, the CIA's chief lawyer, said in an interview last week that Laurence Urgenson, head of the Justice Department's fraud section, "strongly advised" her office not to correct the CIA's letter to prosecutors containing the erroneous information.

The White House was said to be staying out of the issue, maintaining that there was no disagreement between the two agencies and, therefore, no reason for it to intervene.